A survey of preference estimation with unobserved choice set heterogeneity

We provide an introduction to the estimation of discrete choice models when choice sets are heterogeneous and unobserved to the econometrician. We survey the two most popular approaches: integrating over'' and differencing out'' unobserved choice sets. Inspired by Chamberlain (1980)'s original idea of constructing sufficient statistics from observed choices, we introduce the term sufficient set'' to refer to any combination of observed choices that lies within the true but unobserved choice set. The concept of sufficient set helps to unify notation and organize our thinking, to map econometric assumptions onto economic models, and to implement both methods in practice. (C) 2020 The Author(s). Published by Elsevier B.V.

Automated summary

This article provides an introduction to the estimation of discrete choice models in cases where choice sets are heterogeneous and unobserved. The two most popular approaches surveyed are 'integrating over' and 'differencing out' unobserved choice sets. The concept of 'sufficient set' helps unify notation, organize thinking, map econometric assumptions onto economic models, and implement these methods in practice.